* Fourth-quarter adj. earnings/share $0.04 vs est.
* Total sales $1.29 bln vs est. $1.36 bln; Same-store sales
fall 7 percent
* Analyst says gross margins looks like they are stabilizing
* Shares up 3.5 percent at midday
Feb 26 Electronics retailer RadioShack Corp
said it may have to close stores or sell business units
to improve its financial footing if business does not pick up by
2014, although analysts saw some positive signs in a quarter of
Fourth-quarter sales dropped 7 percent, underlining the
tough task facing new Chief Executive Joseph Magnacca as he
tries to transform the struggling electronics chain into a
specialist retailer of mobile devices.
Mobile phone sales dropped 8 percent in the quarter, in part
because of a shortage of Apple Inc's iPhone 5.
Janney Capital Markets analyst David Strasser noted that
margins had stabilized somewhat in the quarter, falling just 29
basis points after dropping by several percentage points in
every other quarter of the year.
"This (strategy of shifting to mobiles) along with
well-managed selling, general and administrative expenses
provides some structure for how the company could become
profitable again," Strasser said in a research note.
RadioShack shares were up 3.5 percent at midday.
"There is no impending negative catalyst so we might have
seen some shorts who might have entered in before pulling their
trades now," Morningstar analyst Liang Feng said. "The results
are relatively dismal in my opinion and no long-term thesis has
Despite its ubiquitous presence in the United States,
analysts say RadioShack has not done enough to rebrand itself as
a destination for mobile phones or to cater to younger
customers, who would rather shop online from the likes of
Amazon.com Inc or at stores run by phone companies.
The company said in a regulatory filing on Tuesday that its
cash and cash equivalents fell to $535.7 million at the end of
2012 from $591.7 million a year ago, as it posted a loss of
$139.4 million for the year. ()
"It's one thing to turn around the financial performance. If
they continue to bleed free cash flow, it's going to get real
ugly, real bad," said BB&T Capital Markets analyst Anthony
Chief Financial Officer Dorvin Lively said on a conference
call with analysts that the most significant contributing factor
to the decline in sales in the quarter was the postpaid wireless
business, combined with the lower margins.
The company has been trying to focus more on selling calling
plans and smartphones, particularly the iPhones, as a way to
pull customers into its stores but it makes less money on the
iPhones than on mobile devices that use Google Inc's
Android operating system.
Tight supplies of iPhone 5 in the first two months following
its launch in September hurt mobile sales, and demand had slowed
by December when more stock was available, Lively said. Overall,
RadioShack had 20 percent fewer phones in stock in the quarter.
RadioShack, based in Fort Worth, Texas, said it expects the
slowdown in sales and margin erosion in the post-paid business
to continue over the next couple of quarters.
"They don't control their own destiny in wireless," Chukumba
said, referring to the fact that it is often carriers like
Sprint Nextel Corp that sets terms of wireless contracts.
RadioShack, which had 4,395 company-operated stores as of
Dec. 31, said liquidity could be hurt further in 2013 as it may
have to issue letters of credit under a 2016 credit facility.
The company said that if operations during the year were
significantly worse than in 2012, it may have to either borrow
against the facility or issue additional letters of credit.
And if the trend continued or worsened after 2013,
RadioShack said it may be forced to incur additional debt at
higher interest rates, reduce capital spending below that
required to support its current level of operations, close a
significant number of stores, or sell one or more subsidiaries.
RadioShack's businesses include RadioShack de Mexico and
RadioShack said in January that it would end its partnership
with Target Corp that operated Target Mobile stores at
Target's 1,500 big box locations, saying the business had
generated losses since inception.
The closure of the stores, expected by April 8, will
"drastically improve profitability", Janney Capital's Strasser
said. RadioShack began operating kiosks in Target stores in
RadioShack, which has a market value of about $304 million,
reported a net loss of $63.3 million, or 63 cents per share, for
the fourth quarter ended Dec. 31, compared with a profit of
$11.9 million, or 12 cents per share, a year earlier.
Excluding a $67 million charge to increase a valuation
allowance related to deferred tax assets, earnings were 4 cents
per share. Sales fell 7 percent to $1.29 billion.
Analysts on average had expected a loss of 5 cents per share
on revenue of $1.36 billion, according to Thomson Reuters
I/B/E/S. Comparable-store sales fell 7 percent.
RadioShack shares were up 3.3 percent at $3.15 in midday
trading on the New York Stock Exchange on Tuesday.